Granny flat interest

A granny flat interest is an agreement for accommodation for life. It is not a description of the type of dwelling.

What it means

A granny flat interest or right is where you pay for the right to live in a specific home for life. It must be:

a private residence

your principal home

You can’t be a legal owner of the home.

The right only lasts for your lifetime. It’s not part of your estate when you die.

Homes that can be granny flats

You can have a granny flat interest in any kind of dwelling and not just those typically referred to as granny flats.

You cannot have a granny flat interest in a property in which you have legal ownership.

Granny flat interests are usually family arrangements providing company and nearby help for older people, but they don’t have to be for social security purposes.

We can count your home as a granny flat interest if:

it’s all or part of a private residence

you, your partner or a trust or company you control don’t own it

you’ve created a granny flat interest

You can be living in:

the same building as the owner of the home or

a separate, self-contained building on someone else’s land

Creating a granny flat interest

You create a granny flat interest when you exchange assets, money or both assets and money for a right to live in someone else’s property for life.

For example, you could transfer:

ownership of your home but keep a lifelong right to live there or in another private property

assets, including money, in return for a lifelong right to live in a home

Before you create a granny flat interest, contact us to see how it could affect your payments.

Life tenancy and life interest

There are 2 ways to have a granny flat interest:

life tenancy – the right to live in the property

life interest – the right to use and benefit from the property as you wish

With both kinds you need to be living there.

If the owner wants to sell

Your granny flat interest can’t be taken away if this happens. They can:

sell it but make your right to live there a condition of sale

transfer your granny flat interest to another property, or

give money or assets to you in return for giving up your granny flat interest

Put it in writing

We may accept that you have a granny flat interest even if it’s not in writing. But we suggest you get a solicitor to draw up a legal document so you have proof of what you and the owner have agreed. This can help prevent problems later if things change. The document should:

confirm your right to live in the home for life

say if you’ve agreed to pay rent or look after any upkeep of the property

say how the owner will compensate you if they want you to give up your granny flat interest

How we assess your granny flat interest

We need to know the value of what you transferred to the property owner in return for your granny flat interest. This is so we can assess whether we consider you to be a home owner or non-home owner, or if you have deprived yourself by paying too much.

We don’t use market value to work out how much a granny flat interest is worth. Instead we value it at the same value as the assets you transferred or paid if you are:

transferring the title of the home you live in to someone else and keep a lifetime right to live in that home or in another home

paying to:

build a granny flat on someone else’s property

convert someone else’s home to suit your needs and getting a lifetime right to live there, or

buying a property in someone else’s name and get a lifetime right to live there

If you transfer other assets as well, we may assess them as deprived assets, or gifts.

Deprived assets and the reasonableness test

A deprived asset also known as gifting, is where you give away an asset without getting something of at least equal value in return.

If you pay more than the cost or value of your granny flat interest, the extra amount is considered to be a deprived asset. The amount of the deprived asset can be reduced by the value of the accommodation using the reasonableness test.